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May 4th, 2023 | 08:50 CEST

Bayer AG, First Phosphate, Porsche - In the fast lane with the right stock mix

  • Mining
  • phosphate
  • Batteries
  • Pharma
  • Electromobility
Photo credits: Porsche

Can sustainability and profitability go hand in hand? When looking at First Phosphate, a company that recently went public, this is true. The Company has found its place in the niche of LFP batteries for the global energy transition. Porsche AG also knows that electromobility is winning the race. The eMacan is selling so well that CFO Meschke has set a target return of 19%. Is that what Bayer's new CEO, Bill Anderson, is thinking? The conglomerate of Consumer Health, Crop Science and Pharma has more potential than the market is currently pricing in.

time to read: 5 minutes | Author: Juliane Zielonka

Table of contents:

    Uwe Ahrens, Direktor, Altech Advanced Materials AG
    "[...] Silumina Anodes® is a ceramic-coated graphite/silicon anode composite material that we plan to produce in Schwarze Pumpe, Saxony. Here, we aim to supply manufacturers of batteries for e-cars with an application-ready drop-in technology that is low-cost, high-performance and safe. [...]" Uwe Ahrens, Direktor, Altech Advanced Materials AG

    Full interview


    Bayer AG: Chairman of Supervisory Board Winkeljohann re-elected

    Despite all the prophecies of doom from a major investor, Chairman Winkeljohann was re-elected. At the group's annual general meeting at the end of April, Winkeljohann received an approval rating of 79.6%. Union Investment, DWS and Deka Investment, which together hold 3.8% of Bayer, according to Refinitiv, have lobbied against the re-election of the Chairman of the Supervisory Board.

    Winkeljohann expressed confidence that he has sufficient time to exercise proper oversight of Bayer. He emphasized that he sees no reason to reduce his supervisory board mandates at this time. In addition to his role as Chairman of the Supervisory Board at Bayer, Winkeljohann also serves as Deputy Chairman of the Board of Management of Deutsche Bank and holds board positions at companies such as Sievert SE, Bohnenkamp AG and Georgsmarienhütte GmbH.

    On February 28, 2023, Bayer announced its 2022 results, boasting consolidated sales of EUR 50.7 billion (+15%). Bayer's Consumer Health business posted healthy growth of 15%, largely due to pandemic-related demand for over-the-counter cold remedies. The controversial Crop Science business was a major contributor to this success, with growth of 25%. The pharmaceuticals business also posted growth of 5% on a full-year basis, although it experienced a decline in the fourth quarter. New products such as Nubeqa and Kerendia, which target chronic kidney disease associated with type 2 diabetes, generated sales of EUR 0.5 billion.

    However, Bayer also had to contend with problems with Xarelto (medication to prevent blood clots), which partly offset growth. Price pressure in the UK, the expiry of the patent in Brazil and tender procedures in China put a strain on the product.

    Energy turnaround with First Phosphate: Joint venture with British company for LFP cathode production

    Phosphorus is one of the elementary nutrients for successful agricultural production and ranks on par with potash and nitrogen. Phosphorus is also used in power supply. Lithium-ion batteries, or LFP batteries for short, are less susceptible to overheating than comparable lithium-ion batteries. LFP batteries are known for their longer life, higher thermal stability and improved safety. The growing use of LFP batteries in electric buses, low-speed electric vehicles and hybrid electric vehicles is due to their safety and low cost.

    First Phosphate is a mineral exploration and development company dedicated entirely to the mining and refining of advanced phosphorus material for the lithium iron phosphate (LFP) battery industry. The phosphate market is dominated by China, making alliances outside the Asian market all the more valuable in securing supply from democratic economies.

    Now First Phosphate has entered into a joint agreement with UK-based Integrals Power Limited ("IPL") to license lithium iron phosphate ("LFP") and LFP production technology. This agreement could serve to secure the Company's future production facilities for LFP active cathode materials, providing a solid foundation for progress. The current value of this deal is still undetermined, but it holds enormous potential for future financial gains.

    IPL plans to verify the purity of First Phosphate LFP phosphoric acid and iron sulphate and validate them for use in manufacturing LFP battery cells. This will actively use IPL's homologation process and First Phosphate's high-quality LFP-grade material. In order to promote the production of LFP cathode active material, First Phosphate is granted a licence for LFP production technology. This licence allows LFP cathode active material to be manufactured at production facilities in Quebec, Canada or elsewhere in North America. A royalty of 1.5% is charged on all sales of LFP cathode active material.

    Those interested in learning more about this project will have a chance to ask CEO John Passalacqua questions directly at the 7th International Investment Forum - IIF - on May 10, 2023. He will present First Phosphate at 14:00 CEST (08.00 am EST, 08.00 pm HKT). Interested investors can register for free here.

    Porsche: CFO confirms target return of up to 19%

    CFO Lutz Meschke announced at this week's quarterly results presentation that price increases of between 4% and 8% are planned in Europe and the US in the second half of the year. The introduction of new electric models will also be used to charge higher prices than for their combustion engine cars.

    For the eMacan model, scheduled for launch next year, the difference will be between 10 to 15%. Porsche aims to permanently maintain its profitability at a level previously only achieved by exclusive brands such as Lamborghini and Ferrari. In the first quarter, the VW subsidiary increased sales and operating profit by more than a quarter.

    The net cash flow, which many analysts consider an essential criterion, could be increased by a proud 84% to EUR 1.4 billion at Porsche. This positive development is due to the conditions in the automotive industry, which was characterized by various challenges in the value chain in the previous year.

    Porsche benefited from a significant increase in deliveries and successful sales of luxury vehicles, which generally generate high margins. Group sales rose 25.5% YOY to over EUR 10 billion, and operating profit increased 25.4% to EUR 1.8 billion. This impressive success illustrates the strength and competitiveness of the Company. At least something still works economically in Germany.

    The global market for lithium iron phosphate batteries is EUR 9.1 billion in 2021 and is expected to grow to a whopping EUR 44.9 billion by 2028, at a CAGR of 25.6%. Investors should therefore analyze First Phosphate more closely as an investment. In addition to the joint venture in the UK, First Phosphate has an area of more than 1,500 sq km in the Saguenay region of Quebec, Canada, which is being actively developed. First Phosphate's sites contain rare anorthosite igneous rocks that typically yield a high-purity phosphorus concentrate without significant amounts of harmful heavy metals. Peter Kent, President of First Phosphate, emphasizes that the Company has a pioneering vision. First Phosphate believes it will be the only publicly listed company in the world dedicated exclusively to producing clean, premium and ethical phosphorus material for the lithium iron phosphate (LFP) battery industry. With this clear focus, First Phosphate sets a new standard in the industry and demonstrates that sustainability and profitability can go hand in hand.

    As of June 1, the new Bayer AG CEO Anderson will have his hands full getting the triumvirate of Pharmaceuticals, Crop Science and Consumer Health back on track for growth. For investors, the change in leadership is a good sign, and now it is time to look for optimization potential. This may be a good time to add some pharma to the portfolio.

    Porsche lives up to its racing image. The Company can significantly strengthen its position in the market through an improved financial strategy and successful implementation of measures that promote cash inflow. A 19% return on investment is sporty yet feasible.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Juliane Zielonka

    Born in Bielefeld, she studied German, English and psychology. The emergence of the Internet in the early '90s led her from university to training in graphic design and marketing communications. After years of agency work in corporate branding, she switched to publishing and learned her editorial craft at Hubert Burda Media.

    About the author

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